Macgregor v MLC Ltd - [2015] WADC 83

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: MACGREGOR -v- MLC LTD [2015] WADC 83

CORAM: DEPUTY REGISTRAR HEWITT

HEARD: 1 JULY 2015

DELIVERED : 16 JULY 2015

FILE NO/S: CIV 177 of 2014

BETWEEN: PENELOPE JANE MACGREGOR
Plaintiff
AND
MLC LTD
Defendant

Catchwords:

Practice and procedure - Summary judgment - Declaration sought - Ability of a fraudulent proposer to rely on s 3N of the Insurance Contracts Act - Whether the declaratory relief sought was available at all or in the context of a summary judgment application

Legislation:

Insurance Contracts Act 1984

Result:

Leave to bring application
Application dismissed

Representation:

Counsel:

Plaintiff: Ms K A Vernon
Defendant: Mr G R Hancy

Solicitors:

Plaintiff: Metaxas & Hager
Defendant: Norton Rose Fulbright Australia

Case(s) referred to in judgment(s):

Nil

DEPUTY REGISTRAR HEWITT: In this case, the plaintiff as executor of the estate of Ian McGregor sues the defendant under the terms of a policy of life insurance entered by the deceased for which the defendant, by various processes which are not relevant to this decision, stands in the position of the insurer. The policy was entered in about September 2010 and provided for a death benefit payable on the deceased's death. The deceased died on 13 February and by a letter dated 9 August 2013 the defendant avoided the policy.
By amendments introduced to the statement of claim on 14 January 2015, the plaintiff pleaded additional relief in the form of declarations. The first declaration sought is that the policy was avoided by the defendant on the ground of the fraudulent failure to comply with the duty of disclosure or fraudulent misrepresentation. The second declaration sought that the defendant's avoidance of the should be disregarded as it would be harsh and unfair not to do so. Coupled with the amendment to the statement of claim the plaintiff brought an application for summary judgment. The full terms of the application are as follows:
1.The plaintiff have leave to bring this application.
2.The Court make the following declarations pursuant to Sections 31 of the Insurance Contracts Act 1984 (Cth) ('ICA'):
2.1the defendant by its letter dated 9 August 2014 to the plaintiff's solicitors avoided the Policy on the ground of fraudulent failure to comply with the duty of disclosure or fraudulent misrepresentation;
2.2the defendant's avoidance of the Policy shall be disregarded as it would be harsh and unfair not to do so;
3.The defendant shall forthwith notify the plaintiff of the accrued death benefit under the Policy as at the date of Iain Macgregor's death being 13 February 2013.
4.Within 7 days, the defendant shall:
4.1pay the plaintiff the sum of money representing the death benefit under the Policy; and
4.2pay the plaintiff interest on such sum pursuant to Section 57 of the ICA.
5.The defendant shall pay the plaintiff's costs of this application and the action, including reserved costs, to be taxed if not agreed.
As framed, the chamber summons is breathtakingly ambitious. However, in argument before me counsel confined the application to declarations set out in pars 2.1 and 2.2.
My first comments concern the nature of declarations. Declarations are a form of discretionary, equitable relief which may be relied upon when the common law does not provide a complete or adequate remedy to the wrong suffered by a litigant. The declarations sought in this case do not satisfy that criteria. The declarations sought relate to findings of fact which the court would need to make in order to grant to the plaintiff the relief which the plaintiff seeks. In this case they are, in my opinion, introduced as an artifice introduced to attempt to obtain binding determinations of fact without the need to go through the usual processes of proof. What the plaintiff seeks is effectively a payout of the amount which is said to be due under the terms of the policy. No declaration is required to achieve that end. All that is required is for a judge considering the facts to make findings which support that outcome. I therefore consider the pleading and the summary judgment application to be entirely misconceived and an attempt to circumvent the normal processes of the court. What is sought is effectively a determination of a preliminary issue based on affidavit evidence. That is not in my opinion a proper application of the law concerning summary judgment. Notwithstanding those observations, I now turn to consider the merits of the arguments advanced.
My first comment is that summary judgment can only be granted if the court is satisfied that there is no real question to be tried. The court does have the power to grant such a judgment in respect of a part of a claim but as is indicated in my earlier remarks and those following I do not regard the relief sought in terms of the declaration in a favourable light.
The relevant legislation is the Insurance Contracts Act 1984 and the relevant sections of that Act are s 29 and s 31.
There is within the Insurance Contracts Act in s 26 an obligation on a party seeking to enter a contract of insurance not to misrepresent matters relevant to that insurance. Section 26(2) provides that a statement should not be taken to be a misrepresentation unless the person made it knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms. In this case the evidence establishes that the deceased had received medical advice and treatment in the years prior to taking out the relevant insurance policy of a prostate condition that was suggestive of a prospect of prostate cancer and he underwent a number of biopsies and tests in regard to that issue. In completing the proposal form the deceased denied that position. Under the provisions of s 29 if an insured has failed to comply with the duty of disclosure or made a misrepresentation to the insurer before the contract was entered into there is an ability of the insurer to avoid the contract. If the failure was not fraudulent, the insurer may within three years after the contract was entered into avoid the contract. If the failure was fraudulent the insurer may avoid the contract at any time.
Interestingly the present application proceeds on the implied basis that the deceased was fraudulent but should be relieved of the effect of that fraud by application of the provisions in s 31 of the Act. That section provides that notwithstanding the fact that a contract of insurance was avoided for a fraudulent failure to comply with a duty of disclosure the court may if it considers it to be harsh and unfair not to do so exercise a discretion to disregard that avoidance and allow a recovery in whole or in part. The exercise of that discretion involves consideration of a number of issues including the need to deter fraudulent conduct and the comparison of the extent of culpability to the magnitude at the loss. Prejudice to the insurer is also a consideration and the court may also have regard to any other relevant matter.
The very nature of the application which is before me implies that it is conceded by the plaintiff, at least for the purposes of this chamber summons, that the deceased breached his duty of disclosure and did so fraudulently. The letter of avoidance was issued by the insurer within three years of the date upon which the contract was entered. It was therefore potentially open to the insurer to avoid the contract without relying on fraud and in so doing there would have been no prospect of the plaintiff invoking the provisions of s 31 of the Act. The matter then comes down to the interesting proposition that the plaintiff seeks to rely upon the fraud of the deceased in order to avail herself of the provisions of s 31 which would not be available in the event that the avoidance was on the basis that the misrepresentation was not fraudulent in which case the provisions of s 31 would not be applicable. That suggests a remarkable anomaly, namely that a fraudulent party in the circumstances of this case is in a better position than an innocent party. That outcome requires some examination.
There is no doubt that the letter purporting to avoid the contract refers to the provisions of s 29(2) ie fraudulent misrepresentation. The letter however does contain information as to the nature of the alleged misrepresentation.
The matter then boils down to the proposition that if the insurer had cared to describe the misrepresentations of the insured as other than fraudulent the action by the executrix could not succeed, whereas since the actions of the deceased were described as fraudulent she has a remedy. No authority was cited to me to suggest that an insurer is required to make a binding election in respect of the avoidance of a policy. On the matters that are before me it appears to be conceded there was a misrepresentation by the deceased, at least for the purposes of this summary judgment application. The whole issue boils down to a matter of process. Is it the law that by choosing to describe the deceased's conduct as fraudulent the insurer has opened the door to allow his estate to set aside the avoidance and impose a financial burden on the insurer? As I have mentioned no cases have been cited to me and it seems to me that it is a proposition of law that should not be taken for granted. Accordingly, on that issue alone I consider that there is a triable issue.
As to the next matter the fact that I am asked to make a declaration that the avoidance of the policy should be disregarded as it would be harsh and unfair not to do so strikes me as a step too far.
That proposition seems to be based on the fact that the deceased held a previous policy with the defendant and on the advice of a financial planner submitted his proposal for the policy relevant to this case. It was made clear that it was necessary, if the proposal was accepted, that the deceased would terminate his existing policy. That is what happened. It is clear that had the plaintiff maintained his existing policy which, as far as I can see, was approximately for the same amount, his estate would have been entitled to a significant payment upon his death. Clearly the plaintiff made a huge mistake in acting as he did. Nonetheless it is not the function of an insurer to provide financial advice to a proposer nor was the insurer properly informed and able to have provided any advice in any event. I struggle with the proposition that it is harsh and unfair to avoid a policy on the grounds of fraudulent misstatement when it was open to the insurer to avoid that policy on the grounds of misstatement whether it be fraudulent or not.
Another issue has been raised in this matter, namely that under the previous policy the insurer had reinsured and would have been entitled to a significant payment had it paid out on the old policy. No such reinsurance exists in regard to the new policy and that is said to be a detriment. I am not at all sure that those facts add up to a detriment within the meaning of the Act but for the purposes of a summary judgment application consider it to be at least arguable that they do. In summary therefore it is my finding that the applications for declarations are misconceived and simply an artifice to attempt to have what could possibly be adjudicated as a preliminary issue, decided on the papers of a summary judgment application and for that reason alone, in my view, this application should fail. Further, in my opinion this case is riddled with triable issues and it is also my opinion that it is not open to make the declaration which is sought in par 2.1 of the chamber summons and the proposition in par 2.2 of the application is simply not a matter which can be dealt with in a summary judgment application. It involves the exercise of a discretion. That is a matter for a judge in trial not a matter for a deputy registrar on a summary judgment application. For these reasons I consider that the plaintiff's application should succeed to the extent that leave to bring the application is granted (that aspect of the application not being challenged) but that the remainder of the application should be dismissed and I invite counsel to move for those orders together with any other orders which are sought when this matter next comes before the court on 16 July 2015.